Question 1

What does Texas property tax actually cost me on a rental?

Accepted Answer

Budget roughly 1.2% to 1.4% of value a year, and treat it as fixed. The Tax Foundation puts the Texas effective property tax rate at 1.40% of owner-occupied housing value for 2026, and published figures range down toward 1.2% depending on the vintage and the county. The rate is set locally by the taxing entities at that address, not by the state, so the only number worth underwriting is the one for the specific property. Two things make this a lending issue rather than a bookkeeping one: property tax is non-discretionary, and it does not fall when the unit sits vacant. On a conventional file that escrow feeds straight into your qualifying ratios, so a bad estimate at application is what kills the loan two weeks in.

Question 2

Does the 2025 property tax relief apply to my investment property?

Accepted Answer

No. That relief flows to owner-occupants. The 89th Legislature's SB 4 raised the mandatory school district homestead exemption from $100,000 to $140,000, voters approved it as Proposition 13 in November 2025, and it applies to the 2026 tax year. SB 23 raised the additional exemption for owners 65 and over or disabled from $10,000 to $60,000. Both are homestead exemptions, and a homestead is a property the owner occupies, so a rental, a flip, or a spec house gets none of it. HB 9 exempts up to $125,000 of business personal property from taxation by all taxing entities, but that covers equipment and inventory, not the real property. Underwrite your escrow off the unexempted assessed value, and talk to your CPA about your own filing.

Question 3

There's no homestead appraisal cap on a rental. What does that mean for my hold?

Accepted Answer

Your assessed value can track the market every year with no ceiling. The 10% annual cap on appraised value increases applies to homesteads only, so non-owner-occupied property has no such cap and the taxable value can rise with the market year over year. That makes the annual appraisal district protest a real carry variable on a Texas hold, not a formality, and it is one reason a five-year pro forma built on year-one taxes overstates the return. It also means the tax bill you see in diligence on a house the seller lived in can reflect years of capped value that resets once you own it. Model the escrow rising; don't model it flat.

Question 4

No state income tax on the rent. How much is that worth?

Accepted Answer

Real, but narrower than it sounds. Texas has no individual income tax, so your net operating income on a Texas rental isn't reduced by a state income tax, which matters most to an out-of-state owner comparing markets. It does not touch your federal tax. And the state gets its revenue elsewhere: property tax is the trade (see the rate above), and Texas imposes a franchise tax on entities rather than a traditional corporate income tax, so if you title in an LLC, as most buy-and-hold investors do, the entity has a Texas franchise obligation to check on. We're a lender, not your CPA. Have yours model the after-tax number before you decide between structures.

Question 5

How much should I budget for insurance escrow in Texas?

Accepted Answer

More than last year, and the direction is the honest answer. Texas average homeowners premiums rose more than 55% between 2019 and 2024, and average rate changes filed with the Texas Department of Insurance ran 11% in 2022, 21% in 2023, 19% in 2024, and 4.3% in 2025. The increases have slowed, but they compounded off a base that was already high, and hail exposure is the reason. We don't publish a dollar figure because the statewide averages you'll find disagree with each other by a wide margin and none of them is your property. Get a real bound quote during diligence, since insurance escrow is part of the payment your conventional file has to qualify on.

Question 6

What's different about closing a Texas investment loan?

Accepted Answer

Title premium is fixed by the state, and comps are harder than you expect. The Texas Insurance Commissioner is required by statute to fix and promulgate title insurance premium rates, so the premium on a given policy amount is identical at every title company in Texas. There is no shopping it. Effective March 1, 2026, TDI ordered a 6.2% reduction in basic premium rates; the department's own worked example puts a $268,500 policy at $1,612. Competition is on escrow service and endorsements, not the premium. The harder part is value: Texas is a non-disclosure state, sale prices aren't recorded on deeds or compelled to the appraisal district, so off-market and non-MLS comps are genuinely thin and the appraisal carries more of the load on your LTV. If the appraisal comes in short, we'll show you the DSCR option next to the conventional one rather than let the file stall.

Question 7

What is a conventional investment property loan?

Accepted Answer

It is standard, competitively priced financing for a non-owner-occupied investment property, the long-term loan you take when your file fits the conventional box. It usually carries a lower rate than a bridge or DSCR loan, in exchange for full documentation.

Question 8

How is it different from a DSCR loan?

Accepted Answer

A conventional loan qualifies on your documented personal income and credit, while a DSCR loan qualifies on the property's rent. Conventional pricing is often lower if you can document your income and you are within the limit on financed properties; DSCR is easier to scale and skips the income docs. We compare both and put you in the one that fits.

Question 9

How much do I need to put down?

Accepted Answer

Plan on roughly 20% to 25% down on an investment-property purchase, with the best pricing at lower leverage and higher credit. Cash-out refinances are typically capped a bit lower than purchases.

Question 10

What credit score do I need?

Accepted Answer

Conventional investment financing generally wants a credit score around 580 or higher, and your rate improves meaningfully as your score and reserves go up. We will tell you up front where your file lands.

Question 11

What can I use it for?

Accepted Answer

Purchases, rate-and-term refinances, and cash-out refinances on non-owner-occupied 1-4 unit investment property. If you will live in the property, that is owner-occupied financing, which we refer to a trusted partner rather than originate here.

Question 12

What documents are required?

Accepted Answer

Because it is fully documented, expect to provide income verification, tax returns, bank statements, and the standard conventional paperwork. If that documentation is a hurdle, our DSCR and bank-statement programs are the no-tax-return alternatives.

Conventional Investment in Texas

How it works

Run your Conventional Investment numbers.

Conventional Investment in Texas: local questions

Conventional Investment questions, answered.

Guides for Conventional Investment

Other programs in Texas

Funding Texas deals fast.